The rally in the EUR USD is another sign that the U.S. currency is losing its luster as a safe haven currency. Optimism is building that the Euro Zone economy is getting ready to turn higher.

Doom and gloom in the GBP USD yesterday turned into optimism today as three reports showed that the U.K. economy may be bottoming.

News that industrial production fell at a slower pace than estimated helped put in a bottom overnight. The bottoming action was confirmed and the market accelerated to the upside when additional reports showed better than expected results in the housing and retail sectors.

Stronger commodity markets helped to support the Canadian Dollar. Gains were limited however as the stock market was under pressure throughout the day. Lately the Canadian Dollar has been moving in lock-step with the U.S. stock market. This could cause problems with the currency if the equities fall as many analysts are predicting.

The strength in the Japanese Yen may be reflecting the possibility of a break in the global equity markets. Yen traders sensing that the stock markets may be topping have been buying back Yen as they exit from the equity markets.

Swiss Franc investors frustrated by the low yields in the U.S. markets are repatriating in an effort to get better returns elsewhere. The recently reported improvements in the U.S. economy and the results of Fed’s bank stress tests have settled the U.S. markets and reduced demand for the U.S. Dollar as a safe haven currency. As long as this economic scenario exists, continue to look for higher markets to follow.

The AUD USD was able to post a strong gain on Tuesday despite a report that the economic contraction will last until at least June 2010. Traders also ignored the news that the budget is expected to show a deficit until 2016. The fact that the market rallied only proves that investors are chasing yield at this time and not paying too much attention to the economy.

The NZD USD has been consolidating the past two days after posting a new high for the year last week at .6126. Traders are still being confounded by this current rally as it suggests that the New Zealand economy is in some kind of a recovery mode. Based on the chart pattern, this market is clearly following the U.S. stock markets as trader appetite for higher yielding assets has increased since March.

The tight range the past two days means that traders are waiting for equity markets to make their next move. Stocks have been stagnant on perceptions of being overvalued. A correction in the equity markets should put pressure on the NZD USD.
By ForexHound.com the portal for Analysis, Education and exclusive timely market Gann Analysis

Disclaimer: Trading foreign exchange on the margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore should not invest money that you cannot afford to lose.